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Author Topic: The Grand Unified Theory On The Economics Of Free  (Read 2644 times)
isthisthingon
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« on: November 12, 2009, 08:09:11 PM »

http://www.techdirt.com/articles/20070503/012939.shtml

Another good one.  From the article:

"So, the simple bulletpoint version:
  • 1. Redefine the market based on the benefits
  • 2. Break the benefits down into scarce and infinite components.
  • 3. Set the infinite components free, syndicate them, make them easy to get -- all to increase the value of the scarce components
  • 4. Charge for the scarce components that are tied to infinite components

So there you have it. After many months, one single summary of the economics of "free" and how it can be used to anyone's advantage. It's not about defending unauthorized downloads. It's not even about getting rid of copyright -- just recognizing that copyright holders can actually be better off ignoring their own copyrights. It's very much about showing the key trends that are impacting all infinite goods -- and pointing out a clear path to benefiting from it (while making life more difficult on those who refuse to give up their old business models). And we're giving it to you all... for free. So, enjoy."
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jammaster82
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« Reply #1 on: November 12, 2009, 09:36:26 PM »

 Applause

totally.  this is how a free market should operate IMO. couldnt agree more. Like how gnutella showed the world how we wanted our entertainment delivered... not being ass raped by time life for six cds that would TECHNICALLY fit on one cd ... i mean COME ON how long were we supposed to buy 2 cds until we figured out that they would all go on one?!?!

The *AA*.* fags should just realize that a view on youtube is free market research and that people who really want the music will buy it on a system like itunes... cause everybody has always been able to dub a dub of a tape on their dual cassette D battery powered boom box... or even just hold up the mic to the radio to make that mix tape (sorry its the onlly thing i had but all the songs mean something from me to you. hahah)

 this really pisses me off.. what about the brilliant artists that have AUDACITY or some similar open source program that want to market their music... IS THE ONLY MARKET PLACE SUCKING SOMEONES oscar mayer in a record corporation?!?!?! WE WANT TO TUBE OUR MUSIC AND WE WILL BUY IT IF YOUR WORTH A SHIT.

what if i were to download a digital copy of a song  that i had purchased on a *NON* chromium oxide tape back in the 80s.  dont even get me into my rolling stones eight track collection i had to THROW OUT.

should i go to prison for enjoying a song in a quality that was WITHHELD FROM ME UNTIL THE LAST MINUTE even though i paid 18$ just so i could hear Peter Gabriel sing mercy street in a medium standard that merits his vocal quality?!? didn't i already get ass raped for 18$ when i bought the tape a long time ago and wasn't allowed to download the unfluffed real deal?!?!?

The reality of it for me, is if i like an artist, i will buy it to SUPPORT them..
and i don't even have all that much money but im a hell of a tipper in a restaurant or bar..


nuff said. I'm gonna log out now... im at the end of my wick here.. Wink

couldnt agree more,  if your saying that the business model of yesterday and the riaa industry sucks an analog bonaphone.... If you play good music ill pay 50$ a ticket to hear you play it... i shouldnt have to be milked for decades to hear a digital version of it...

 
« Last Edit: November 12, 2009, 09:39:17 PM by jammaster82 » Logged

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isthisthingon
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« Reply #2 on: November 12, 2009, 10:14:32 PM »

Quote
IS THE ONLY MARKET PLACE SUCKING SOMEONES oscar mayer in a record corporation?!?!?!

Sucking someone's Oscar MeyerTM is not just distasteful for those who dislike being wienie-slammed, it's heralded as the true path to fairly rewarding those artists who deserve our contributions.  Fuckin LOL, the Master of Wienie Puppets actually convinced the masses that tithing to record companies means supporting artists  Shocked  And we all drank the punch, on one level or another.

Quote
should i go to prison for enjoying a song in a quality that was WITHHELD FROM ME UNTIL THE LAST MINUTE even though i paid 18$ just so i could hear Peter Gabriel sing mercy street in a medium standard that merits his vocal quality?!?

Yes.  And you should realize that you're a shameful Pirate who has no concept of compensating anyone for their creative contributions to this planet.  You're a lazy thief who only wants handouts.  You want nothing more than to disguise your selfish, lazy greed in costumes of equality and concern.  You should be in prison.  But for a limited time, we'll reduce your sentence in exchange for signing this extreme savings music club contract!!  You'll be plagued with (I mean blessed with) a new CD every week from some of the greatest talents of all time including Phil Collins, Chicago, Christopher Cross, and recently sold-out (I mean "joined us") - Boys to Men!!!  I mean the Back Door Boys, or something appealing like that  Roll Eyes  Anyway, pick your poison: hard-time or surrender your soul.  The choice is yours.  It would be a hell of a lot easier if you didn't have a "soul" to sell no?  ROFLMAO

Quote
i will buy it to SUPPORT them..

All you want is free shit, admit it.

Quote
If you play good music ill pay 50$ a ticket to hear you play it

 Praise  All sarcasm aside - right on.  Same here jam.   Ditto
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nop_90
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« Reply #3 on: November 12, 2009, 11:52:13 PM »

The problem is "free" did not become an economic factor until the last 10 years.
In the past "free" was not really free, just the costs where hidden somewhere.
You are paying for the "free" phone with the 2 year contract.

For all intents and purposes, bandwidth, computing power and storage costs are approaching zero.
Also since chips,fiber optic and memory are made from sand, the actual physical cost of these components is zero, and the potential supply is unlimited.
I think that is the hardest part to grasp, stuff that is now free, really is free.

History has show that trying to protect a changing economic system with tarrifs or imprisonment just does not work.
When the 13 colonies rebelled against britain, the real issues was taxation and that the colonies wanted to be able to print thier own currency.
The so call "opression" by the british king was non-existant, religous wise, administration wise the colonies could do what they wanted as long as they used british currency and paid british taxes. I find it rather ironic that USA is now trying to do to the rest of the world what they got rid of a british king for Smiley

Again the 4 points basically sum up the "free" book i have mentioned before.
Like all things that are very simple, it is very complex. Poker is a very simple game, but to win it is very complex Smiley.
Bottom line is that the recording industry etc is scared shitless. They know that thier "british soldiers" will be able to intimidate people for a while.
But as they have to hire more and more "soldiers" and each battle becomes more and more costly ......
So again they have to figure out how to make $$$ from a comodity that before had a price and is now free Smiley



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« Reply #4 on: November 13, 2009, 05:21:06 AM »

The problem is "free" did not become an economic factor until the last 10 years.
In the past "free" was not really free, just the costs where hidden somewhere.
You are paying for the "free" phone with the 2 year contract.

For all intents and purposes, bandwidth, computing power and storage costs are approaching zero.
Also since chips,fiber optic and memory are made from sand, the actual physical cost of these components is zero, and the potential supply is unlimited.
I think that is the hardest part to grasp, stuff that is now free, really is free.

In my opinion this whole "really free" services are just a big trend that's going to collapse at some point unless we actually figure out how to deal with real world costs. Only players in town will be those who were able to build a viable company that makes money in other ways. Don't get me wrong, I would love it if everything was available for free but I find it hard to believe. And I belong in the age group that has grown in the era of "really free" that Chris Anderson spoke in the book.

Actually nothing is never really free and if you want to cite the book Free you should also remember mention that the point is that price of providing the service is getting so low it doesn't get measured anymore. That's the whole point of the book Free. And potential supply of sand isn't unlimited. In fact nothing is unlimited until we figure out how to create atoms from nothing. Before that, everything is limited by the amount of atoms we have in certain forms. It's just that things that can be offered for "really free" are actually so cheap to obtain that cost of getting them becomes insignificant.

Another point of the book Free is that many times costs are distributed so well that many things seem like they are "really free". That's the case of internet as well for the user but not for the company. All the electricity, equipment and so on to get bits from A to B are very far from free when you have to pay them for yourself. Just ask Google or any other company with big data centers how free those things are.

Many times people just don't think about that when people are building "really free" service. When there's lot's of users there has to be some income channel to keep providing this free service. And when there's no income channel for the company, nobody will keep the service alive hence you see so many 404s with older "really free" services.

The old truth nothing is free is still alive and well - it's just the perception and utilization of free that has changed. Money still has to come from somewhere.
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isthisthingon
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« Reply #5 on: November 13, 2009, 09:49:03 AM »

Quote
Don't get me wrong, I would love it if everything was available for free but I find it hard to believe.

I wouldn't.  I think having everything for free would be a terrible idea that would completely collapse our economy, unless another viable alternative replaced it.  I wouldn't want it for myself so I could get free stuff and I wouldn't wish that on our economy.  The idea is:

1. Release that which has infinite potential - so that you can...
2. Focus on that which truly is scarce (the non-free, make money part)

#2 is where you charge, profit, etc.  It's NOT free.  It's MORE valuable because of #1.  The "free" business model has nothing to do with making everything free, but this is almost impossible to explain. 

I know how you feel about Google but have you considered Facebook?  How about the rest of the seemingly endless sea of companies offering "free" things for the express purpose of making more money in the areas of scarcity that they do focus on?

The biggest hurdle is letting go of the concept of artificially generating scarcity.  We're so programmed to believe this is a requirement that it's really difficult to imagine a world without it.

Quote
Just ask Google or any other company with big data centers how free those things are.

The goal here is to offset the cost.  Amazon has done a fantastic job of this, as has Google.  In fact, Google effectively doesn't even pay for their Internet since it's offset by the things they are charging for.  It's like thinking your poor landlord has such a huge bill to pay each month - this apartment complex doesn't grow on trees you know.  No free lunch for him.  But wait - with enough occupants the cost is offset and even profitable.  So one could say that the apartment complex is "free" for the landlord.  It's clearly not free, has risk, etc. etc. but this term is used interchangeably. 
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perkiset
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« Reply #6 on: November 13, 2009, 11:57:30 AM »

Let's place this into real world terms.

Musician makes song (the infinite part). Releases it for free. Hopefully, gains enough traction to increase draw at concerts, for which he can now charge more for because that is the finite, valuable part?

I see this as hooie. Concerts, for example, are often a break even solution to pay for the infinite part - the released music. In the model you are describing, the musician releases that which costs him time, talent and treasure so that he can do what ... other things to make money?

Free means lost leader. That's it IMO. In some instances, this might make sense. How many companies really have the horsepower to code another SAP on a free Oracle release? They don't, so Oracle (or another company that charges less than them) becomes the consultant to implement said software. But essentially, Oracle becomes the distributor of a tool that makes lots of other people money - but because of the overhead and development cost of the DB itself, they (as a consultancy) have to charge too much to get the job.

This is much like VS' notion that Apple is "overpriced" hardware. Consider: the 21" iMac is $1099. Now: go buy Dell (or equivalent) equipment that has the same specs ... and the same level of engineering. Find me a hardware company that has to spend what Apple does to develop the "perfect OS" to go with their hardware. None. Apple is not overpriced - they just don't buy into the race towards zero, which ALWAYS includes a certain amount of concession so that you *can* be free.

Please tell me how the musician and Oracle make money here. Again, I am a BIG fan of people being able to give things away for free. Big fan and personal subscriber. But "free" as a business model is inherently flawed, unless the "free" component perceived and booked as a marketing effort. In which case, it is baked into the fees on the other side and "Poof!" It's a no load fund. IOW, you don't pay on the front side, but you will in management fees on the back.
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isthisthingon
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« Reply #7 on: November 13, 2009, 12:57:07 PM »

>Musician makes song (the infinite part).

No.  This is the finite part.  The infinite (and optional) part is allowing digital reproductions to be copied, promoted, and distributed instantly around the globe - without paying a cent for this exposure and distribution.  Then making another song has tremendous value that it never had before.  Again, this only works if the music is good.  If the music sucks you'd be a lot better off signing with a record company and suing the Pirates who attempt to hear the music in an unapproved way.

Quote
I see this as hooie.

Most people do.  And it's important to realize that I'm not saying that everything should be like this.  I'm simply trying to help you and others understand how free has become a hot-spot for mega riches and at the same time it's provided a service that helps reduce the digital divide.  But the mega-riches part is not on the table for argument, since it's all right there in the books of those unfathomably successful companies that thrive on this impossibly hard concept to grasp.  I'm way cool with you and anyone doing business the way they see fit.  I'll take a stance when people's lives are ruined due to predatory business practices but when it comes to an artist choosing how he/she will charge for their art, man it's totally their game.  As a supporter of art I'd hope that they would realize how much better they could do by properly harnessing current technologies.  But I have absolutely zero feelings of negativity towards anyone choosing to distribute anything they create in anyway they choose.  Mega-period.

Quote
This is much like VS' notion that Apple is "overpriced" hardware.

With all due respect vs couldn't possibly own that "notion," because it doesn't exist  ROFLMAO

Quote
unless the "free" component perceived and booked as a marketing effort. In which case, it is baked into the fees on the other side and "Poof!" It's a no load fund. IOW, you don't pay on the front side, but you will in management fees on the back.

Progress!!!  Yes - that's part of the equation.  And again remember the element of nuance.  We're not talking about Free Software, which you should just think of as Freedom Software.  This element of "free" relates to how businesses ARE succeeding beyond anyone's wildest dreams prior to it happening.  The last comparably disruptive business transformation was when Microsoft turned all of this very similar old-business thinking on it's head with Windows.  In that model there was a similarity in that people had no way to predict how utterly ubiquitous Windows would become.  So an innocent looking thing like an inexpensive operating system became the monster neither Apple nor IBM anticipated.  Once everyone had this OS then what?  Ah ha!  Make the best most tightly integrated software (Office) for this OS and sell THAT.  No, they didn't give the OS away for free.  But the similarity is the value created AFTER everyone was using it  Idea... Idea... Idea...

Then Google did it to Microsoft  ROFLMAO  Karma's a bitch aint it?  ROFLMAO

>Please tell me how the musician and Oracle make money here.

The musician must be good.  Oracle is publicly traded and last I checked they're quite uber profitable.  IBM is totally deep into the free game these days, as is Salesforce.  Say that reminds me, did you know Salesforce gives away free virtual organizations to anyone for personal use?  There's an externality in that individuals can "steal" from them by using their service and not paying a dime.  But the moment some user begins looking like a business - blamo!!  Pay or login go bye-bye.  Interesting concept no?  They use free, not "free" trial, but truly free, that is...

 Idea... ...until you begin making money using their product, as a business, in which case you actually have money to pay them Idea... 

However in the case of Salesforce they're struggling so badly financially they'll probably become extinct soon Roll Eyes


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nop_90
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« Reply #8 on: November 13, 2009, 05:15:48 PM »

Something which in the past was very expensive is now very cheap (or in this case free).
This is nothing new.

When frederick the great decided to outfit his army with new muskets.
For 10+ years he ordered that every metal worker in Prussia had to make X muskets a year.
As a result he destroyed the economy of Prussia.

That is why the "Brown Bess" musket in Britian was kept in service for over 100+ years.
There where better muskets available. But to refit the army with new muskets would have bankrupted britain.

Flash ahead to the American Civil war.
Both sides put 600-1 million men under arms. The firearms where all produced within maybe 1 year.

Today you can buy an AK47 for like $50, an M16 sells for like ~$700.
In real cost the M16 is like 1/1000th the cost of a brown bess which probably took an gunsmith like 3 months to make.
Obviously if u where a company that made brown bess muskets, and u did not adapt to the new economy .....

Historically there where companies that adapted to the new economies.
IBM is an example. From a manufacturer they have transformed into a service company.
Apple is an example. Apple is not longer as much as a computer manufacturer, but as perks puts it a "user experience" provider.

Airline industry is a good example (perks probably knows more about this).
20+ years ago a travel agent made his $$$ from selling tickets.
Today a travel agent is lucky if he breaks even selling tickets.
A modern travel agent is a "user experience" provider, as in he makes a tour package that will provide the client with an enjoyable vacation.
Many travel agencies did not clue in and are now gone.
Lots of travel agencies are making more $$$$ then ever being "user experience" providers.






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isthisthingon
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« Reply #9 on: November 15, 2009, 11:30:55 AM »

Quote
IBM is an example. From a manufacturer they have transformed into a service company.

Yes.  Microsoft is moving that direction too with Azure.  In fact I think IBM puts it nicely in their "grid" page:

Quote
A new era is here
Information technology is changing rapidly, and now forms an invisible layer that increasingly touches every aspect of our lives. Power grids, traffic control, healthcare, water supplies, food and energy, along with most of the world's financial transactions, all now depend on information technology.

An emerging compute model—cloud computing—addresses the explosive growth of internet-connected devices, and complements the increasing presence of technology in today's world. Cloud computing is massively scalable, provides a superior user experience, and is characterized by new, internet-driven economics.

IBM Smart Business
Cloud computing represents a paradigm shift in the consumption and delivery of IT services. Built on the foundation of a dynamic infrastructure, IBM Smart Business cloud solutions are workload optimized and provide a choice of delivery options.

Good reading here on the definition of a "dynamic infrastructure": http://www-03.ibm.com/systems/dynamicinfrastructure/smarter_planet/index.html

The pdf: ftp://ftp.software.ibm.com/common/ssi/pm/xb/n/oie03003usen/OIE03003USEN.PDF
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